But Google isn’t exactly happy about this new prudishness on privacy and whines that losing such detailed information so quickly could be bad for business (and innovation!):

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While we’re glad that this will bring some additional improvement in privacy, we’re also concerned about the potential loss of security, quality and innovation that may result from having less data. As the period prior to anonymization gets shorter, the added privacy benefits are less significant and the utility lost from the data grows. So, it’s difficult to find the perfect equilibrium between privacy on the one hand, and other factors, such as innovation and security, on the other.

Unfortunately for Google, there’s no rational equilibrium or cost/benefits analysis in this debate because people are different. Privacy is one of those things that people have a hard time putting a dollar value on, and everyone is different. Some people will take their clothes off for free, for money or never at all. Maybe the Google engineers can create an algorithm that respects that continuum and factors in the way heightened scrutiny affects where people lie on that continuum. Until then, we’re checking in with other search providers to see how Google’s decision will affect their own data retention policies.

Update: Through a spokeswoman, Yahoo has said it anonymizes data for 13 months and will still “continue to engage in a thoughtful dialogue with regulators and legislators in the EU and the U.S. about the best practices for protecting user privacy while improving our leading set of Internet services.”

Microsoft didn’t disclose any details, but sent a statement from Brendon Lynch, director of privacy strategy at Microsoft, that said, “The Article 29 Working Party has asked all major search companies to look into reducing their search data anonymization timeframes and how they anonymize search data, which we believe is equally as important as the timeframe. We will have more to share in the next few months.”

The problem with this kind of security expose is that Google is doing what every online service provider has done for ages – tracking the behavior of their users to learn more about how they should improve. We’re naive to think everybody isn’t doing this. Google, as they’ve grown, has just been more heavily scrutinized.

Is it shady? Yeah, definitely. Does it help them make a better product? Yeah, probably. Are they ripping vital data from us? No, probably not. It’s just our responsibility to manage tracking cookies with discretion. Companies won’t stop doing this unless they don’t have anything to gain from it.

If you’re interested in privacy issues in this Web 2.0 age, check out the “Lifestreaming: The Real Time Web” event on Sep 16th. FriendFeed and Seesmic are going to be there on the panel. http://www.vlab.org/article.html?aid=221

How long did it take to find real people in, I think, AOL so called anonymous search data?
This is just a PR release to make technically challenged people (EU bureaucrats) believe they have gained something.